An irreverent Wall Street Blog

BrokeAndBroker.com Blog by Bill Singer WEEK IN REVIEW

November 5, 2016


Irony can be a pretty funny thing.  For example, take Wells Fargo's much publicized cross-selling and leveraging of its customer base. By most measures, that strategy was a phenomenal success resulting in the opening of many new customer accounts. Unfortunately, that same strategy produced a $185 million fines when it turned out that 2 million of those new accounts were unauthorized. Why did Wells Fargo undertake such a dramatic push for new business?  Likely to boost its bottom line and enhance its reputation. What did it cost the firm when its bogus account rampage was revealed? It took a hit to its bottom line and its credibility and integrity were hammered. How ironic, no? The gods have not quite finished playing with this mighty Wall Street firm: Consider a recent bit of irony involving an employee ripping off the firm. READ


In two recent Financial Industry Regulatory Authority disciplinary settlements, the regulator addressed hedge fund sales by a registered representative and his firm's apparent failure to do much in the way of overseeing that activity. FINRA has fired a warning shot across the bow of in-house compliance staff who fail to pursue proactive compliance. READ


The more I re-read a recent FINRA Arbitration Decision involving Wells Fargo, the angrier I become. The case raises questions about the duty of care that is owed to elderly customers by their brokerage firms and servicing financial professionals. As chillingly suggested in this litigation, the compliance credo of one of FINRA largest member firms seems to be something along the lines of: Don't look for trouble and, if you're lucky, you won't find it. Sadly, the Decision fails to present many underlying facts and is largely devoid of any rationale. In the end, perhaps these failures are not the fault of the arbitrators as much as FINRA's culture of benign neglect, which fails to ensure quality control. READ


Among the legacies of the Great Recession is a large number of extant wage garnishments. For many associated persons, these reminders are professional embarrassments and believed to be the reason behind a lack of job offers or promotions.  Be it legal or not, many employers likely do take unpaid judgments and liens into consideration when it comes to hiring, retention, and promotion.  In a recent regulatory settlement by the Financial Industry Regulatory Authority, we see how one member firm failed to grapple with notices of garnishment against some of its employees. As the self-regulatory organization saw it, the firm should have inquired as to whether the garnishments indicated other likely disclosable financial issues such as bankruptcies and unpaid judgments or liens. READ


In today's BrokeAndBroker.com Blog, we got two German banks, we got a Cayman Island shell company, we got lawyers hotly contesting a dispute in the New York State court system, and we got a feudal French legal concept that decides who wins -- not just your plain, everyday French legal concept but one going back to the days when dragons roamed the skies and way, way, way before you could get an all-day breakfast menu at McDonald's. We're talking about a time when wireless communication consisted of having your serf carry a message to someone else's serf and hoping that some guy running around the forest with a gang of so-called merry men didn't kill or capture your serf before he delivered your message. READ


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